Variety is the spice of house building
The government recently published Sir Oliver Letwin’s draft analysis on so-called ‘land banks’ which focuses on the delay between obtaining an implementable planning consent and the completion of new homes. We take a look at some of the key findings published in the draft report.
The review focuses on large sites in areas of high housing demand, and seeks to determine actual build out rates on those sites, why those rates are as they are and what factors might increase build out rates without other untoward effects, such as a decrease in the open market value of existing homes. Sites visited as part of the review include Nine Elms, Wandsworth (comprising circa 20,000 dwellings), Barking Riverside, Barking and Dagenham (circa 10,800 dwellings), Eastern Quarry, Ebbsfleet, Ebbsfleet Development Corporation (circa 6,250 dwellings) and Wembley Park, Brent (circa 3,500 dwellings).
In brief, build out rates on large sites are managed with regard to “absorption rates”, being the rate at which new homes can be sold into the local market without disturbing the existing market price. Absorption rates have been found largely to be determined by the type (including size, design, context and tenure) and pricing of the new homes built. The report concludes that the absorption rate is restricted due to the current ‘homogeneous’ products available in the market.
Sir Oliver Letwin concludes that if the major house builders offer
“much more housing of varying types, designs and tenures (and, indeed, more distinct settings, landscapes and street-scapes) on the large sites” then absorption rates and therefore house build out rates could be substantially accelerated.
Other possible constraints
The report also considers a number of other possible constraints and whether these impact upon the absorption rate.
Lack of transport infrastructure
It is obvious that faster resolution of major infrastructure issues can bring forward the timing of opening up new sites for housing delivery (and unlock the potential for housing at existing sites (as was the case at the Olympic Park)). Whilst a welcome approach, Sir Oliver Letwin believes that doing so would not have any noticeable impact on the build out rates after implementation. He nevertheless urges collective working across government to assist in the provision of major infrastructure.
Limited availability of skilled labour and limited supply of building materials
Rather unsurprisingly the investigation has found that the availability of materials and labour is a significant concern for major house builders. Sir Oliver concludes that if there is a reasonable level of assurance as to the future of materials being required, then investment in production is likely to follow with any gap filled by imports. He also notes that skilled labour is or could generally be available to meet demand even if rates of construction increase, albeit he seeks further data in certain areas, and identifies potential for a shortage of bricklayers requiring investment in training. Overall, the shortage of skills and materials are recurring themes amongst those sites on which the review is based.
Solutions include importing materials from Europe in order to maintain production. For example at Nine Elms off-site manufactured bathroom pods were imported in order to reduce the need for plumbers, despite this being reported to be at an additional cost of 40-60%. Some of the sites are looking at modular construction methods, however it was pointed out within the assessment that this may not offer the flexibility required from using a mix of traditional methods and modular construction depending on local supply chain, which can lower lead-in times. Other issues include the significant length of time it can take to train staff (which can be as long as 3 years).
There has been no recent shortage of accusations that house builders ‘land bank’ (i.e. lock up land and reduce active construction sites). Sir Oliver Letwin agrees that a type of land banking exists (led by the capacity of the market to absorb houses and not affect prices) but dismisses claims that the major builders are attempting to influence the market by “locking up” land through options and agreements. He addresses the issue head on and provides a sensible rationale behind major house builders holding large amounts of land: to maintain a sustainable business. He does not dismiss the idea that holding land might be attractive to certain investors.
Other possible constraints discussed include:
- Difficulties of land remediation
- Delayed installations by utility companies
- Constrained site logistics, and
- Limited availability of capital
Offering a variety of housing sounds a simple solution but implementing planning policy requiring developers to viably abide and provide such housing is not. Whilst certain elements of the ‘variety’ required to assist with the absorption rate are ascertainable (such as tenure and type), good design is and will always remain subjective.
The review provides much food for thought on current issues in the housing market, but the key will be to see how this translates into policy. Sir Oliver acknowledges that there is no ‘one size fits all’ solution and we predict a range of both short and long term measures to be put forward by the time of the budget in Autumn.
Charity Training: Digital Transformation in the Charity Sector
We would be delighted if you could join us for the second session in our new series of bite-size webinars for charities.
Charity Training: Brand Protection
We would be delighted if you could join us for the first in our new series of bite-size webinars for charities.
The UK’s New Skilled Worker & Intra-Company Visa Routes: a closer look
Taking a closer look at the UK’s new visas to assist UK businesses.
Practicalities in Cladding Claims
Insight into Issues with Cladding Claims
EWS1 Forms - the latest episode
RICS have now published their highly anticipated guidance on when EWS1 forms will be required.
Q&A: Am I insured for COVID-19?
Laura Bushaway writes for Estates Gazette on a recent claim under the “disease clause” of business interruption policy.
The Purpose Podcast: Corporate purpose
Simon Ridpath discusses corporate purpose and the rise of environmental, social and governance (ESG) issues in “The Purpose Podcast”
Snail farms and other slow moving business (rates mitigation schemes)
Client alert: Construction under competition law spotlight
We outline the three investigations which have either recently concluded or are ongoing together with what this means for businesses.
New permitted development right to convert unused commercial premises into homes to come into force
Looking beyond the benefitted land: confirmation that an objector’s wider property may be considered in applications to discharge/modify restrictive covenants
Read our recent case study on applicants who were prevented from developing a new house due to a restrictive covenant covering their land.
Further extension of coronavirus restrictions affecting residential properties: Where are we now?
The extension will be implemented from and including 31 March 2021 by the Coronavirus Act 2020.
Knight Frank Wealth Report: The Global Perspective on Prime Property & Investment
Knight Frank partners joined Charles Russell Speechlys for a virtual panel-led discussion on the Knight Frank Wealth Report
Case Study: One Blackfriars Limited
An informative and positive judgment for administrators selling high-value property in distressed and complex scenarios.
Keeping Up With Construction: Handover at Practical Completion - Practical Pointers
Practical tips for the handover of a successful project.
Charles Russell Speechlys advises on Trident Royalties’ US$28m Placing
Trident Royalties plc is a growth-focused mining royalty and streaming company.
Temporary restrictions on winding-up petitions extended until 30 June 2021
As the restrictions are extended, read what it means for you here.
Commercial rent arrears: what are the latest restrictions on landlords’ remedies this quarter day?
What you need to know for this Quarter Day.
Charles Russell Speechlys advises Avation plc on £7.5m secondary placing
Headquartered in Singapore, Avation plc manages a fleet of aircraft which it leases to airlines across the world.
To Promote or not to Promote, that is the Option: Top 10 Tips with Promotion Agreements
Providing you with the top ten tips with promotion agreements - what should you know?